CRISPR Therapeutics (CRSP) is one of the most-discussed pioneering technology plays on the market today.
Indeed, this stock has been better than a 5-bagger for investors who have held CRSP stock for the past five years. For those with a long-term view on this stock, perhaps similar results are in store for the next five years.
Gene editing plays are among the hottest in the biotech world today. The company’s market capitalization of nearly $10 billion speaks to the degree of confidence investors have in CRISPR’s ability to generate growing cash flows over time.
Some investors may be concerned with the valuation this stock has generated. The company hasn’t really produced any sort of meaningful revenue or cash flows thus far. Thankfully for growth investors, stocks are valued on the basis of their earnings potential, rather than backwards-looking data. (See CRISPR Therapeutics stock analysis on TipRanks)
What Does CRSPR Do?
CRISPR’s name stands for Clustered Regularly Interspaced Short Palindromic Repeat. In layman’s terms, the company’s a gene editing play, built upon the advancements made with the CRISPR/Cas9 gene editing tool.
It is important to note that CRSP isn’t the only player utilizing the CRISPR/Cas9 gene editing tool. The company’s competitors include Intellia Therapeutics (NTLA) and Editas Medicine (EDIT). These competitors and others are utilizing gene therapy solutions in their business models.
Competition isn’t great for any company in any sector. However, the gene editing space is one with high growth potential and perhaps enough room for everyone.
The global gene editing market was valued at $3.7 billion in 2020, but is expected to grow at a 23% CAGR for the next seven years. For long-term investors, that’s a very nice rate of return. If CRISPR can snag a meaningful piece of this growing pie, long-term investors will do very well.
Of course, bringing a drug to market is only the first step. Here’s what’s cooking with CRISPR in this regard.
Potential Value of CRISPR Stock Lies in Drug Pipeline
CRISPR’s potential as a transformative technological breakthrough is well-known. Long-term investors have jumped on CRSP stock for this reason alone. Additionally, the company’s prospective drug pipeline is intriguing.
CRISPR’s lead candidate is CTX001, a drug focused on treating Sickle Cell disease and Beta Thalassemia. This drug has been touted as the blockbuster drug which has the potential to take CRSP stock on a nice ride. However, it is not yet commercialized.
CRISPR is hoping to commercialize its CTX001 drug via a collaboration with Vertex Pharmaceuticals (VRTX). This collaboration has been updated recently, to provide CRSPR with a cash infusion and give Vertex greater upside potential from commercialization.
Given the cash needs of CRISPR in further developing its technology and building out its drug pipeline, this deal likely makes sense. As a result of the deal, CRISPR receives $900 million in cash up front, with $200 million in milestone payments, should CTX001 be approved by the FDA or European regulators. In exchange, Vertex will receive 60% of the future revenues generated from this drug.
The potential of this drug is truly impressive. This is the drug investors have their eye on right now, as most of CRISPR’s other potential candidates are likely years away from potential approval. Accordingly, the impact of a prospective approval could take this stock soaring.
On the other hand, should an approval either fail to materialize or take substantially longer than investors are pricing in, there is the potential for downside volatility with CRSP stock. This remains in many ways a speculative play on the future of gene editing technology.
What Analysts Are Saying About CRSP Stock
According to TipRanks’ analyst rating consensus, CRSP stock comes in as a Moderate Buy. Out of 10 analyst ratings, there are 7 Buy recommendations, 1 Hold recommendation, and 2 Sell recommendations.
As for price targets, the average analyst CRISPR price target is $160.75. Analyst price targets range from a low of $117.00 per share to a high of $189.00 per share.
CRSP stock is difficult to value right now. This company is still essentially pre-revenue, and holds a massive valuation.
That being said, the company’s technology does look very promising. It’s easy to see why CRSP stock has garnered the valuation it has, and if the company does get approval for its CTX001 drug, all bets are off as to how high this stock could fly.
For aggressive investors, this stock certainly looks like an intriguing pick. For more conservative investors, staying on the sidelines may be the best course of action.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.